31st Jul 2014 13:04
LONDON (Alliance News) - US stocks are set for a significantly lower open Thursday as a number of global events, including a debt default in Argentina, are weighing on investor sentiment, trumping some positive corporate earnings.
US stocks were lifted off their lows to a mixed close Wednesday after the Federal Reserve allayed market concerns that it might shift its wording on when to expect the first US interest rate rise since the financial crisis, which spread after the unexpectedly strong second-quarter GBP print of an annualised 4.0%.
The Fed maintained its stance that it will be appropriate for interest rates to remain at their current levels for "considerable time after the asset purchase program ends," although a slightly hawkish shift was noted as Philadelphia Fed President Charles Plosser voted to have that wording removed from the statement.
The Nasdaq Composite outperformed on Wednesday, closing up 0.5%, boosted in no small part by a 20% rise in Twitter shares after the social-media company announced a significant expansion in its user base. The S&P 500 closed flat, and the DJIA closed down 0.2%.
Futures trading indicates that the DJIA, the S&P 500, and the Nasdaq Composite will all open at least 0.5% lower Thursday.
The lower open will follow a soft UK and European session, where markets have been hit by a number of concerning pieces of news, including a lower growth target suggested for China by the International Monetary Fund, another drop in consumer prices in the eurozone, and the second Argentinian debt default in little over a decade.
Heading towards the US opening bell, the FTSE 100 is down 0.2%, the FTSE 250 is down 0.8%, and the AIM All-Share is down 0.2%.
European majors have been hit particularly hard by concern over the economic impact of increased sanctions against Russia, with the German DAX 30 down 1.2% and the CAC 40 down 0.9%.
Adidas is weighing heavy on the German market and on sentiment in general, with its shares down as much as 15% after the sporting goods giant issued a profit warning, and said that it has decided to significantly reduce its store opening plan in Russia due to weakness in the ruble and increasing risks to consumer sentiment and consumer spending from current tensions in the region.
"When you see profit warnings like these from such a large company, it really makes you realise exactly what these countries are losing every time a fresh batch of sanctions are imposed on Russia," said Alpari market analyst Craig Erlam.
Added to the eurozone CPI print earlier Thursday, which showed a further slip in price growth to 0.4% in July from 0.5% in June, the profit warning highlights the delicate balance that EU leaders are trying to strike between punishing Russia for its part in the Ukraine crisis, without doing too much damage to their own economies.
In the UK, the oil majors continue to provide the only significant support to an otherwise negative trading session, with Royal Dutch Shell at the top of the FTSE 100, up 3.8%, BG Group up 1.2%, and BP up 1.1%.
A strong earnings report from Shell Thursday raised hopes for US-listed Exxon Mobil, the second biggest company by market capitalisation in the DJIA. Exxon lived up to its UK peer by reporting earnings per share of USD2.05 in the second quarter, beating the consensus estimate of USD1.86. Even so, the stock has slipped in pre-market trading, currently down more than 1.0%.
Following the boost to social-technology stocks provided by Twitter on Wednesday, LinkedIn is the next name in the space to report results, with its numbers due after the closing bell Thursday.
It is a much lighter day of US economic news Thursday, with initial jobless claims having provided the main focus as a warm up for Friday's non-farm payroll report. The report showed 302,000 people made new benefit claims in the US in the week ended July 25, up from 279,000 in the previous week, and fractionally more than the 301,000 that had been expected.
By Jon Darby; [email protected]; @jondarby100
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